“Europe has the wind in its sails,” European Commission President Jean-Claude Juncker proclaimed in his State of the Union address last September. But are its sails too tattered to propel Europe forward?

To be sure, ten years after the global economic crisis, Europe’s economy is finally returning to growth – and, with it, confidence. And Juncker’s optimism probably also reflected the triumph in France’s presidential election last year of the pro-European Emmanuel Macron, who advocates deep reforms – including banking union, fiscal union, and a federal budget – to advance integration.

But recent elections in Austria, Germany, and the Czech Republic tell a different story: a serious threat to Europe’s future – right-wing populism – remains very much alive. Although the economic crisis is over, its scars remain fresh.

Middle- and working-class households are still recovering from the decline in their purchasing power, and they well recall how banks – which had been bailed out by the state – curtailed credit. For many citizens, the lesson seemed clear: in today’s Europe, gains are privatized, and losses are socialized.

The upshot of this assessment was the belief that economic and political elites – enabled by the European Union – would always act to maintain their position and impose their will on ordinary people. The push for austerity in struggling countries, rather than counter-cyclical measures that would have curtailed the slowdown, seemed to confirm this impression.

To change this perception, EU leaders would need to agree on the fundamental causes of the crisis and develop a strategy for avoiding another one. And, so far, they have achieved neither task, with two main groups of countries adopting conflicting interpretations of the problem.

The first camp – which includes Greece, Italy, and, to a lesser extent, France – reproaches the EU for its lack of solidarity. Italy, for example, submitted to austerity, but has not benefited from a return to strong growth.

Moreover, the country fears that a banking union will reduce its room for manoeuvre in repairing its own broken banking system. And, with France and Germany front and center, Italy does not even enjoy significant prestige within the Union.

All of this breeds resentment, particularly among those who feel abandoned or betrayed by Europe. As a result, Italy, once a leading supporter of European integration, is among the most skeptical of further integration today.

The second camp – including countries like Austria and the Netherlands – makes the opposite complaint. Many in these countries feel that they have suffered as a result of “European solidarity,” even as they have worked hard to secure their own prosperity. Given this, they tend to believe that Europe should focus on deepening the single market, not on deepening fiscal and political union. Here, too, resistance to further integration is fueling support for populist parties.

But economics is not the only factor stoking populism. Three other factors are also contributing, with migration undoubtedly the most important. Since 2015, when the number of migrants to Europe surged, right-wing populists have capitalized on widespread insecurity over immigration and identity, stoking Islamophobia and racism in order to win support.

Whereas Europe’s divide over the economy is north-south, on migration, the split is between east and west. Central and Eastern European countries’ histories of shifting borders and bullying by larger states have made the policing of cultural boundaries central to their political identity. And today, they reject migration so strongly that they have refused to fulfill their responsibility, as EU members, to accept the European Commission’s refugee quotas. For these overwhelmingly homogeneous countries, being compelled to accept migrants could be enough to make EU membership unappealing, despite the massive economic benefits it has brought.

Another source of pressure on the EU – and a potential source of fuel for the populist fire – is Brexit. While withdrawal from the EU will impose massive costs on the United Kingdom, frustrated EU members may now regard the threat of exit as more potent, and thus a potentially effective tool for resisting integration in the name of national sovereignty.

And while populists may be the most extreme voices advocating such resistance, they are being enabled by Europe’s conservatives. The EU reprimands Poland for its government’s illiberal policies, but tolerates Hungary, because Prime Minister Viktor Orbán’s Fidesz Party is affiliated with the European People’s Party, and thus protected by Germany’s Christian Democrats.

The final factor sustaining populism in Europe is US President Donald Trump, whose hostility toward the EU is only thinly veiled. Of course, widespread opposition to Trump could serve as a kind of unifying force in the EU, which would not hesitate to respond if Trumpian protectionism or other policies ended up affecting its members directly.

But, for now, Europe’s individual countries seem eager to try their luck individually with Trump. Notably, Macron wants to use direct engagement with Trump to strengthen France’s standing both in Europe, where the UK’s former influence might appear to be up for grabs, and more broadly. Others regard Trump as a potential source of protection. Some Central and Eastern European leaders also see him as a source of legitimacy for their own populist agendas.

So Europe’s populist tide is far from receding. But the extent to which the EU is at risk of being swept away by it is unclear – and is likely to remain so as the grey area between mainstream and populist parties continues to grow. - Project Syndicate